November 3rd 2016

Philadelphia Business Journal

Categorized As:

As more people find alternate modes of transportation to their destinations during the SEPTA strike, experts say the standstill will be no more than an inconvenience in the short-term, but in the long-term it could cause tens to hundreds of millions of dollars worth of damages to the local economy.

Meanwhile, experts say it will not negatively affect the perception of Philadelphia.

A number of SEPTA's services came to a halt after midnight on Monday, Nov. 1, after 4,700 members of the transit agency's largest union, Transport Workers Union Local 234, walked off of the job after its labor agreement before a new deal was reached.

As a result of the strike, SEPTA's Market-Frankford and Broad Street lines, buses, trolleys and trackless trolleys were taken offline.

The strike, now in its third day, is the ninth strike by city transit workers since 1975, according to NBC10. The last one occurred in 2009 and lasted six days. SEPTA has had a number of labor strikes throughout the last few decades, including three in the 1980s and two in the 1990s, one of which lasted 41 days.

As long as the current strike is a short-lived one, experts say Philadelphia's economy won't be greatly damaged.

"There are marginal changes in productivity in terms of people losing time, having to work from home or having to leave early," said Steven Wray, executive director of the Economy League of Greater Philadelphia. "It's a short-term disruption. If it becomes longer term, it could have a permanent impact on SEPTA and how people get around the city."

A short-term strike will come at a cost, but "there will be recovery from it," said Richard Voith, president and principal of Econsult Solutions. "There always has been in the past, but the recovery will be quicker if it's a short strike."

On Monday, a number of companies — including Wells Fargo, Decher, Saxbys and the Independence Visitor Center — noted a minimal effect on their operations as employees find alternate roots or work from home.

"Given that Philadelphia, and especially the tourist-oriented parts of Philly, are so pedestrian friendly, I'm not sure that the short-term impact rises much above the level of a relatively minor inconvenience," said Wesley S. Roehl, professor of tourism management at Temple University's School of Sport, Tourism & Hospitality Management.

"One exception might be getting to and from the airport," Roehl said. "The SEPTA line from the airport to Center City is very handy for visitors flying in and staying in Center City." SEPTA's Regional Rail service is under a different union. It's still running, although the strike has led to delays on Regional Rail.

If the strike is extended, Philadelphia and the local economy could suffer. No studies have been done to determine the repercussions of the current strike, but hundreds of millions of dollars could be lost as a result based on another report that assessed what would happen if SEPTA were wiped out of the state.

Without the transit agency, the Philadelphia region would see a rise in transportation and time costs for drivers and former transit users totaling $2.08 billion a year, according to 2013 report by Econsult Solutions and the Economy League in support of getting a better funding source for SEPTA.

Based on the study's methodology, Philadelphia could incur between $50 million and $100 million worth of damages in just one week of a strike, said Voith, who was vice chair of SEPTA's board in the 1990s.

"I don’t think that it is unreasonable to guess the economic impact of a one-week strike as 1/52 of the $2.08 billion figure," said Voith, who also said "we can all absorb it in the short term, but in the long term, it gets to be very destructive."

Net costs for people who use transit but forced to shift to other means of travel would total $581 million, according to the report. Former transit users forced to drive would incur costs of $336 million plus an additional $182 million parking costs.

A demand in parking space would also increase the average daily parking rate.

Here's more:

Regional drivers would incur an additional cost of $1.37 billion, including $1.19 billion in the value of time loss because of an increase in general congestion and $176 million from the impact of higher parking rates.

Additional auto travel would result in an additional $134 million associated with accidents. The number of accidents resulting in fatalities and injuries would increase as driving goes up.

The region without SEPTA would also represent in 246,000 jobs lost in Philadelphia; a decrease of taxable property value in Philadelphia by $59 billion, or 59 percent; and a decrease in suburban property value by $34.9 billion, or 17 percent.

"Strikes are meant to cause economic harm for the employer," said Art Hochner, associate professor of human resource management at the Fox School of Business at Temple University. Hochner is the leading researcher in labor relations, union management and union negotiation.

"Sometimes the employer [and union] want there to be a strike because they can't give in without putting a fight; it's part of the optics of negotiations," Hochner said. "The union leaders are responsible to its members, and SEPTA isresponsible to its board. They have to please constituencies."

Hochner said this particular strike was timed "for maximal impact to the public." If it had happened in the summer — unless it was around the Democratic National Convention — it wouldn't have that much of an impact.

"Strategically, from negotiating point of view, you want to put your pressure at the appropriate time when you can get a lot of attention," Hochner said. This strike is leading up to the Nov. 8 presidential election.

Hochner — who was part of a faculty strike in 1990 at Temple University that lasted 29 days — said he does not believe the current SEPTA strike will last long.

A hit to perception of Philadelphia?

While the strike could jolt Philadelphia from an economic standpoint, it would not have an adverse impact its image as a destination from a marketing standpoint.

"It's a short-term, non-permanent inconvenience that is occurring in the city right now," said Mark Lang, associate professor at St. Joseph's University, who's worked in brand management and market analysis for companies Melitta Coffee, CIBC Bank and PricewaterhouseCoopers.

"If someone thinks of New York, San Francisco and Los Angeles, these are things that happen from time to time in these cities; it's nothing unusual, standout or a point of difference towards Philadelphia," Lang said.

One thing to consider about travelers coming to Philadelphia is that they usually come to Philadelphia Friday through Sunday for leisure when traffic is lighter, said Meryl Levitz, president and CEO of Visit Philadelphia.

Most leisure travelers don't use public transportation; in the fall, about 80 percent of overnight visitors to the region drive to Philadelphia, so the strike would impact visitors on the road, Levitz said. Further, about 18 percent of overnight visitors fly to Philadelphia, while 14 percent take the train.

"They're not going to change their plans because of the transit strike," Levitz said. "That's where Philadelphia's walkability, location and fame as a drive destination just really come in."

Roehl, however, disagreed and said the SEPTA strike would have an impact on Philadelphia's image.

"Despite the quality of the Philadelphia visitor experience and the hard work everyone has put into polishing the image of Philadelphia as a destination, there is still that underlying idea about Philadelphia being an unwelcoming place, a city that doesn't work, and that Philadelphians are hostile," Roehl said. "Think about the concern that was expressed a few years ago when Parking Wars was filming in Philadelphia."

"Given Philadelphia's history as an easy target for jokes and some of the uncomplimentary tropes about Philadelphia that circulate," Roehl said, "a transit strike might well play into those stereotypes."